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The ABC is reporting the election outcome as 73 Coalition, 72 Labor, even though one National Party member has indicated he will not sit as part of the coalition. If they had made a similar choice favoring Labor (eg by accepting at face value the statement of the Green MP that he intends to support Labor) I’m sure the cries of bias from the political right would have reached the heavens.

Everybody hates drug cheats. But that doesn’t seem to stop it happening, and it’s easy enough to see why.

I just finished the Bridge to Brisbane 10km fun run. I was doing really well on my training, and seemed certain to beat my personal best when I started getting knee pains – nothing really bad, but enough that I stopped before it got any worse. I got some help from the physio and did lots of stretches, but it was still a problem. So, on the day, I just took a couple of ibuprofen, and did my best to ignore it[1]. And, if I could have taken a pill that would fix my knees for me, I would have done so.

Am I, then, a budding drug cheat?

fn1. updated My friend and colleague Flavio Menezes (who beat me by 3 minutes) advises me that my time was 53:20, which is (just) a PB. My knees advise me that they will forgive me just this once. And, I should mention that, thanks to a series of miscalculations, i did the run with no assistance from caffeine, the wonder drug on which I rely for all things. So, with good knees and strong coffee, I can still hope to break 50.Read more…

With the country still waiting for the final results of the Saturday vote, reporters in the capital, Canberra, got a dose Wednesday of the self-described “force from the north” and the other independent legislators who could hold the balance of power in Australia’s first deadlocked Parliament in 70 years.

“If you live in a country town in Australia, every year you own a business, you know it’s going to get worse and worse,” Mr. Katter, a 65-year-old former stockman, said at the National Press Club on Wednesday. “Every year, you know your kids are going to leave because there are no jobs for them. Maybe a high school closes this year, maybe you lose your dentist next year.

“The people of rural Australia have put some of us here. They expect a return for having done that. As far as I’m concerned, they will get a return.”

Since the voting Saturday, the Australian news media have been scrambling to get a fix on Mr. Katter and the other once-obscure lawmakers who may be called upon to resolve the stalemate in the House of Representatives, where neither the incumbent center-left Labor Party nor a coalition of the conservative Liberal and rural-based National parties appear to have captured the 76 seats needed to form a majority government.

The final election result may not be known for another week. But Prime Minister Julia Gillard and her conservative rival, Tony Abbott, have already begun courting Mr. Katter, who has made no secret of how he intends to use his newfound power: to demand a “fairer go” for rural Australians.

All three independents hail from sparsely populated rural areas, where voters have long been at odds with the mainstream parties in Australia’s urban-focused political debate. Access to education, hospitals, jobs and telecommunications are key issues for voters in “the bush,” the vast stretches of scrubby grasslands that are home to about a quarter of Australia’s 22 million people.

The divide between urban and rural voters has long been a feature of Australian politics. The country’s vast expanses and relatively small population and tax base make it difficult for the government to provide basic services to many remote areas. But many country dwellers feel that their concerns are ignored by politicians scrambling for the bulk of votes in Australia’s heavily populated cities.

The three independents are all former members of the center-right National Party, the rural element of Mr. Abbott’s conservative coalition. But they have all bristled at suggestions that their former allegiance makes them more likely to support Mr. Abbott in a hung Parliament. While Mr. Katter does not endorse the Labor Party, he has described the conservatives as being “about as popular as a black snake in a sleeping bag,” with many farmers unhappy about the free trade deals enacted by the former prime minister, John Howard.

Tony Windsor, an independent representative from a northern part of New South Wales, told Sky News this week that he had rid himself of “two cancers” when he gave up smoking and split from the Nationals in the early 1990s. The 59-year-old former farmer and economist has been a bipartisan negotiator since he entered Parliament in 2001 and has said he is now more interested in forming a stable government that will last a full three-year term than in trading on particular favors for his electorate.

Rob Oakeshott, a 40-year-old from New South Wales, has been one of the loudest voices for parliamentary reform since he gained a platform as potential kingmaker in this election. He has said that he wants to reduce the stranglehold that Labor and the coalition hold on Parliament by making it easier for third parties and independents to introduce and debate legislation.

Mr. Oakeshott, who is widely reported to have allowed a refugee to stay in his home and has called for a more compassionate approach to asylum seekers, has also called on his fellow lawmakers to adopt a more collegial tone in Parliament, where petty insults and name-calling frequently dominate the debate. A young, charismatic leader with a personable style, Mr. Oakshott was once hailed as the next great hope of the National Party, but he left the party in 2002, saying that it had been co-opted by property developers and other special interests.

“Australia was completely underwhelmed by both major parties and by the way Parliament itself has been behaving,” Mr. Oakeshott said. “This is a moment where we can all do some things for all of us to get some better outcomes.”

After holding closed-door talks on Tuesday, the three emerged saying they would not necessarily vote as a bloc if called upon to break the Parliamentary stalemate. While they are all advocates for rural Australia, they differ on several key points, namely climate change, how to handle a recent influx of asylum seekers and the government’s proposed tax on mining profits.

They have said they will not engage in formal talks about the possible shape of a minority government until the official election result is finished. But on Wednesday, the three presented Ms. Gillard and Mr. Abbott with a list of seven demands, including a full briefing on the state of the economy, and an independent audit of how much the two opponents’ election promises would cost.

Ms. Gillard and Mr. Abbott could wind up having to deal with a fourth independent, Andrew Wilkie, whose election to a formerly safe Labor seat in the southern state of Tasmania appears likely but has not been confirmed. Another factor is Adam Bandt, a Greens party representative from Melbourne, who has said he would prefer to support a government led by Ms. Gillard but has not ruled out a compromise with the current opposition.

Meanwhile, Mr. Katter said he would continue to push the hardest bargain for his constituents on the banana plantations and in the coal mines of northern Queensland: “I’ve bought and sold cattle for a large portion of my life, and I like to think I can drive a deal.”

That’s the title of Daniel Drezner’s review Zombie Economics along with several other post-crisis books. I’m glad he likes the title, but he offers what seems to me to be a rather unfair representation of my argument. As the author, I’m not exactly unbiased, so see what you think.Read more…

The NYT ran yet another round in the long-running EU vs US series a week or so ago. Although it’s not covered explicitly in the NYT, there is actually some news to report here, in addition to rehearsal of the same old themes.

For quite some time, the US and the leading EU countries have been fairly comparable in terms of output per hour worked. The US has had higher output per person for two reasons: a relatively high employment/population ratio and very high average hours worked per person. The first of these is important because it raises the possibility that EU countries performing well on productivity measures are benefiting from the “Thatcher effect” . If low-skilled workers are excluded from employment, for example by restrictive macro policy, as in Thatcher’s case, or by labor market sclerosis, as claimed by critics of European institutions, then productivity measures are artificially boosted.

This issue is now moot. As a result of the crisis, the US employment/population ratio has dropped sharply, to the point where the US is now little different from the EU. The difference in GDP per person between the US and leading European countries is driven primarily by differences in average hours worked by employed people.

To get the data on this, I’ve had to combine Eurostat and OECD info (always a little problematic, but neither had all the info I wanted).

From Eurostat, the E/P ratio (total employment/pop 15-64) for the euro area was 58.5 in 1997 and rose to 64.8 by 2009 (France 64.2 , Germany 70.0). Over the same period, the US ratio has fallen from 73.5 to 67.6, with the bulk of the decline in the last couple of years. The remaining difference is entirely due to the higher US employment-population ratio for women – the ratios for men are virtually identical.

Turning to the OECD for information on productivity and GDP per capita, thesetables shows that relative to the euro area as a whole, the US still has a substantial lead in productivity (about 15 per cent). But for the leading European economies, like France, Germany and the Netherlands, the productivity gap is below 10 per cent, which is well within the margin of error associated with PPP conversions[1]. Particularly for the latter two, the big difference is in annual average hours worked (1681 for the US, 1390 for Germany, 1378 for the Netherlands). The difference in average hours almost entirely explains the gap in GDP per person between Germany and the US, and more than explains the gap for the Netherlands.

As is well known, Europeans tend to offset their lower hours of paid work by doing more household labor. Taking this into account properly would diminish the gap in both directions – relative to the US, European hours of work would rise, and so would output per person.

I was hoping for a good exposition of this from Peter Baldwin whose book The Narcissism of Minor Differences: How America and Europe are Alike has a promising title (I haven’t read it yet). Unfortunately, he only gets half of the story, saying

Americans work 23 percent more than Germans in the marketplace. However, once we factor in household labor, the drudgery that allows us to function in the world, the difference in total work drops to 12 percent. And interestingly, the figures for time actually spent at leisure are almost precisely the same for the two nations.

That Americans work 12 percent more than Germans seems to be the hard kernel that emerges from the statistics. Considering that for that 12 percent investment the American G.N.P. per capita is 32 percent higher than the German, this seems a defensible trade-off. Perhaps Americans have collectively decided to work somewhat harder to be substantially better off.

The problem here is that Baldwin has missed the point that household labor is productive.

Coming to my own take on all this, it seems that the European and US systems yield roughly equal productivity, and roughly equal labor market performance (as measured by E/P ratios). Higher European taxes mean more and better public services (at the cost of reduced private consumption) and they are also (along with social preferences) reflected in lower hours of work and more household labor. I know which looks more appealing to me, but there’s no obvious way of saying which is best.

Rather more clear-cut is the price paid by the US in terms of greater inequality. Compared to the European case, and to the US in the past, the top percentiles of US households collect a much larger share of total income, and there doesn’t seem to be any net economic payoff for this.

fn1. (Very wonkish note) Although PPP numbers are often treated as if they are are raw facts, they are index numbers which are fundamentally imprecise (even if the underlying data is perfectly accurate, which it isn’t). From work I did with Steve Dowrick in the 1990s, I estimate the difference between upper and lower bounds at around 10 per cent. It’s likely that any bias in PPP numbers favors the US. That’s because they are a generalized kind of Laspeyres index, and (as I understand it) the base data is derived largely from Europe.

There seems to be a significant chance that the election will produce a Labor government depending on Green votes in the Reps to provide a lead over the Coalition, and in the Senate to pass legislation. I find it hard to believe that the process we’ve just been through could produce such an outcome, not only matching my preferences but reflecting those expressed by the majority of voters, but that’s what some of the papers are saying is likely. We’ll just have to wait and see.

In place of the usual weekend reflections, here’s a forum to discuss the election. I’m feeling gloomy about the outcome, but I don’t claim any special insight and my gloom may just reflect the awfulness of the whole business.

But is it any better to understand the science and do nothing about it as the Labor Party under Gillard is doing? The hacks and spin merchants who now control Labor policy are every bit as bad as Abbott. Delay is just as bad as delusion.

Truly this election is the most depressing I can recall in forty years. If there has been one in our history where both parties have so thoroughly dodged the issues, I’m not aware of it.

fn1. As previously stated, I’m not willing to debate the science of climate change on this blog, since there are plenty of better venues. But you don’t need much expertise in the statistics of time series to expose this line for the dishonest piece of cherrypicking it is. Anyone who espouses it is either a liar or a fool. If anyone wishes to put themselves into one or other of these categories in the comments thread they are welcome to do so.

Over Fifty Australian Economists Agree Fiscal Stimulus Prevented A Major Recession

Nobel Laureate Professor Joseph Stiglitz has stated publicly that the Australian Fiscal Stimulus was a well designed package that saved the Australian economy from a major recession that has hit almost all the other OECD economies. He argued that the Australian package was a model for other economies facing similar problems.

The attached letter was signed by over fifty academic economists. Several other academics and economists supported this view about the Fiscal Stimulus Package that prevented the Australian economy from a deep recession and prevented a massive increase in unemployment.

The Australian economy has come out of the Global Financial Crisis in surprisingly good shape thanks to this Stimulus Package.

The Australian unemployment rate is amongst the lowest of any of the OECD economies.

Unlike the US and Europe, we are not facing the possibility of a double dip recession.

The current level of government debt (the lowest in the OECD economies) is due to tax revenues falling during a slow-down in the economy, whilst social security payments increase. Most of the increase in the debt would have happened independently of the increased government expenditures associated with the Stimulus Package.

The Stimulus Package has led to an increase in infrastructure investment that would help the long-term development of the Australian Economy.

As we enter the final week of the campaign, all the indications are that Tony Abbott and the Coalition have fallen short in their improbably near-run attempt to limit Labor to one term. If this happens, there can be few losers of Australian elections who have more richly deserved their fate. Sadly, there can be few winners who have deserved it less than Labor, on the basis of its performance since the abandonment of the ETS and the axing of Kevin Rudd. (In the event of an upset, both judgements would still be true). The media, for whom horse-race metaphors like the one I’ve used to title this post, seem to be the best they can do, can share in the credit for this depressing business.

A few probably forlorn hopes: First, it will be some consolation if the Greens win some Lower House seats. The very unlikely event that they might hold the balance of power in both houses would be the just reward to the major parties for their appalling performance. Nothing is impossible, but the odds against are long.

Second, win or lose, the ALP needs to sack Karl Bitar and his crew, and intervene in the disastrous NSW branch. The combination of corruption, thuggery and incompetence displayed by this mob is breathtaking, and they are a huge millstone around the neck of the Labor party.

Third, given the general dishonesty of the campaign, I would be perfectly happy to see Julia Gillard dump her absurd idea of a citizen focus group, and proceed to implement the climate policies we all know to be necessary.

A final point. When the Coalition has looked like winning, various people have pointed to this mildly snarky post in which I predicted we would never see another Liberal government. My point was not that Labor would be in forever, but that the Libs and Nats would have to merge before they could win. That has in fact happened in Queensland, which makes the continued existence of a separate, but permanently coalitional, National Party in NSW and Victoria even more absurd. But obviously, I was expecting Labor to stay in for at least two terms. At this point, I’m willing to renew my prediction, though obviously it’s a matter of probability rather than certainty. To be clear, I expect the Libs and Nats to merge at a national level before they regain government.

As I was reminded in comments last time, snarking about libertarians is not a very productive substitute for writing well-argued posts about The Way Forward for Social Democracy, or writing my nearly-due examiners report for that PhD thesis, or revising my article on climate change on discounting, or getting the yard under control. But if I was capable of responding to that kind of reasoning, I wouldn’t be a blogger would I. So, in lieu of something useful, here’s a thought that occurred to me.

Among the more plausible candidates for an Actually Existing Libertopia, the US in C19 (with asterisks) is pretty prominent. Also, on the basis of fairly thin historical evidence, the Iceland of the sagas. It seems to me that these examples have one crucial point in common that hasn’t received much attention

Looking at the US case, it seems fair to say that, if you ignore the asterisks (women, blacks, native Americans and the emerging industrial working class), the 19th century setup was a fair approximation to the libertarian ideal. I’m going to ignore the industrial part of the economy for the moment, and, for the sake of argument, treat slavery and Jim Crow as aberrations peculiar to the South. Finally, and again for the sake of argument, I’ll concede the possibility that the legal rights of women and men could have been equalized (at least in formal terms) without upsetting the C19 applecart.

That leaves on remaining asterisk – native Americans – and it seems to me that this is the one that can’t be avoided. In a largely agricultural society, the historical norm has been the emergence of an aristocracy based on the ownership of land, and ruling over a tenant peasantry or landless laborers. The only case that doesn’t happen is where there is an appealing exit option for the peasants, such as migration to the city.

But another exit option exists wherever there is a frontier (that is, a border with a less militarily advanced society) as in C19 US. With a frontier, agricultural land is freely available to anyone willing and able to kill, drive away or enslave the current occupiers. That obviously makes life difficult for any aspiring aristocrats[1]. The Icelanders were in a similar position. If any local jarl got too big for his boots, it was a simple matter to hop into a longship and go off to loot some abbeys.

It is, as my Marxist friends used to say, no coincidence that the end of the era of (white male agricultural) US libertarianism came to an end with the “closing” of the frontier. I’d guess, though I have no real evidence that the same was true in Iceland once the Viking option was no longer available.

The standard Lockean case for (propertarian) libertarianism rests on the (universally false) assumption that an appropriation of land leaves “enough and as good” for anyone else. As long as land can be stolen from people who are outside the pale in one way or another, Lockeans (and a fortiori Jeffersonians) can convince themselves that they are devotees of liberty rather than of the forcible imposition of property rights in land (and, for Jeffersonians, other people). Once there’s no more land left to steal, it becomes obvious that propertarianism is fundamentally dependent on coercion, just like (for example) socialism or any other form of government.

fn1. The only place a real agricultural aristocracy emerged was in the South with slavery and then, in a more attenuated form, with sharecropping, dependent ultimately on Jim Crow.

Henry’s post linking to Charlie Stross reminded me of one I was planning to do on the question – why has there never been a serious attempt at a real libertarian utopia? Most other utopian ideologies have inspired at least someone to attempt a practical implementation. On the face of it, libertarianism seems ideally suited to the belief in a fresh start, with no messy pre-existing claims. All sorts of ideas have been floated – island buyouts, sea-steading, co-ordinated moves to New Hampshire and so on, but none has gone anywhere. The only explanation I’ve seen, that libertarians are too independent and ornery to organise a utopia doesn’t convince me.

Thinking about the discussion we had though, it strikes me that there is a simple explanation: Actually Existing Libertarianism (see below) offers a better economic deal for nearly all libertarians than any feasible version of Galt’s Gulch. Once you do the math on going Galt, it’s not hard to see why no self-respecting libertarian would actually do it.

Let’s start with our oppressed libertarian, paying a 50 per cent tax rate, and waiting every year for Tax Freedom Day (July 1). Say that half this money is spent (highly inefficiently) on public services and the rest is given to the undeserving poor, bureaucrats and so on. I’ll make him (gender assumed advisedly) a computer programmer, so he can continue to earn his living from the comfort of his cruise ship, island or whatever. So, immediately he makes the break for Libertopia (island, ship or whatever), his disposable income doubles.

But then the problems start. The state may not do a great job providing services of all kinds, but those services have to be replaced. Libertopia doesn’t sound like a very appealing place for schoolteachers, nurses, and so on, so most public services would probably have to be supplied by external contractor. The cost of that would wipe out any savings from eliminating government inefficiency. So, the net gain in disposable income falls to 50 per cent.

More generally, you have the Stross problem. Suppose a starting population of 10 000. That’s too small to provide more than basic goods and services, so everything else would have to be imported in small quantities. As everyone who has spent time on an island (even one close to the mainland), or a small remote community, knows, that means everything costs more (often double) and most things aren’t available at all. Even if all the registered Libertarians in the US (about 250 000) moved en masse they would still be heavily dependent on high-cost imports. Almost certainly, that would more than wipe out the gain from tax freedom.

Finally, while our hero would never become disabled or unemployed, it’s bound to happen to some people. That means either budgeting for organised charity or putting up with lots of beggars. Randians might appreciate this daily testimony to their own superiority, but I suspect others would prefer that these losers move elsewhere.

All things considered, it seems pretty clear that Libertopia would yield its residents a greatly reduced standard of living, compared to what they could get from a government. Of course, the ideal would be a nearby government jurisdiction that would provide the large-scale industry needed for a ready source of consumer goods, a home for contracted-in service providers, support for losers and so on, but would not be able to tax the Libertopians.

But once you think that you realise that a partial approach to this outcome already exists, and has millions of inhabitants across the US. They’re called suburban Republicans. The suburbs benefit from urban centers, but resist paying for them, mostly successfully. It’s not exactly Libertopia, but it’s obviously close enough to be more appealing than going Galt.

Tony Abbott got away with his howler on the effects of carbon taxes on electricity prices. But, in a piece of poetic justice, he’s now been tripped up by his ignorance of the technical issues underlying his broadband policy, not nearly as bad a piece of intellectual laziness, in my view, but enough to cement the (correct) impression that he is not across the details of key policy issues. To be fair, he doesn’t pretend to be: he offers simplistic slogans to the voters because that’s all he is capable of understanding. In the US, such self-confessed ignorance is a pre-requisite for political success, at least on the right. It seems we are heading the same way.

Although Zombie Economics isn’t due out until Halloween (end of October), you can pre-order from the Australian distributor (Footprint Books, form attached) or from the main US outlets (Powells, Borders, Amazon).

It’s often debated whether advertising in general, and political advertising in particular, is effective. I can say that the Liberal Party’s TV ads have been effective in ensuring that Liberal candidates will receive my coveted last preference. Of course, the ads aren’t aimed at me, so I just have to hope that the average Australian is not the bigoted fool the Liberal campaign supposes. And, of course, things would be a lot easier if Labor were aiming for something more than my second-last preference.

The question of Australia’s population is finally a matter of serious debate, after years of being settled by default and deceit[1]. As this surprisingly reasonable piece from Chris Berg of the IPA points out, even the Greens, who have generally been willing to “present clear policy where Labor and the Coalition just waffle”, have found this difficult to handle. Berg observes that the Greens are torn between general sympathy for those wanting to migrate and environmental concerns about the implications of population growth.

For Berg, a Big Australia advocate, the issue is simple. Environmental issues can always be fixed by economic growth and “high immigration … has been the fuel of the Australian economy for two centuries.” Implicitly, Berg asserts that more immigration will make current Australian residents better off. The problem, as Ross Gittins points out is that this generally isn’t true. Increased immigration doesn’t raise average income for those already here, and the need for lots of new infrastructure creates all kinds of economic and social stresses. Of course, the costs are even greater in the case of natural increase – Peter Costello’s fatuous suggestion that couples should have an extra child for the sake of the country was a prime illustration of his lack of any economic understanding, despite a dozen years as Treasurer.

So, there is no getting around the dilemma described by Berg. Considered in terms of aggregate numbers, we would be better off, economically, socially and environmentally, with a slower rate of population growth. But potential immigrants aren’t just numbers. They are people with a variety of good reasons for wanting to come here (to reunite with family members, or to take up a job to escape from persecution or just to get a better life). Refusing them admission hurts them as well as those in Australia (relatives, potential colleagues and employers, those who feel a moral obligation to help refugees) who want to welcome them here. There is no easy answer to this question, and the wishful thinking displayed by advocates of a Big Australia does not help to resolve it.

fn1. The most prominent example being the Howard government’s policy of ramping up immigration while playing on racist fears in relation to boat people. Under Abbott, the conservatives are at least consistently anti-immigrant. That makes them less dishonest, if no less ugly.

Unimpressed as I am by Labor Julia Gillard’s Prime Ministership, they (and she) remain far preferable to the alternative. For an illustration of what’s on offer, let’s look at Tony Abbott’s claim (repated on quite a number of occasions) that a $40/tonne carbon tax will double the price of electricity. For coal-fired electricity, CO2 emissions are around 1 tonne/MWh for black coal (a tonne of coal generates about 2.5 tonnes of CO2, and also about 2.5 MWh of electricity), and a little more for brown coal. So, a $40/tonne tax implies an additional cost of 4c/kwh. Electricity prices vary a lot, but currently the standard retail rate in Queensland is around 20c/kWh, so the price increase would be around 20 per cent for households. Businesses that use large amounts of electricity pay lower prices and would therefore face a higher price increase, but since the generator cost of electricity is typically more than $40/MWh, no one paying a market-determined price would face a doubling[1].

What’s really striking about this is that it occurs in a context where Laurie Oakes is questioning Abbott about his credibility. The next question, referring to previous inconsistencies is “But, isn’t it important if you become Prime Minister, that Australians can believe what their Prime Minister says?”. Oakes is pretty good on who said what and when, but he lacks the basic arithmetic skills and policy background to call Abbott out on an obvious lie. And if Oakes doesn’t think it’s important to understand basic facts about the policy issues, you can bet the same is true of the rest of the Canberra Press Gallery, who hang on his every word.

fn1. Probably there are some aluminium smelters on cosy deals from the 1980s and 1990s paying prices below generator cost, but the odds are they would have tobe compensated in any case, whether or not this is justified economically or socially.

It’s hard to know what is most deplorable about this story, so I’ll leave it to readers to choose what they deplore most. For me, I think the comments from an Education Queensland[1] official supporting the teaching of creationism